Finance 101

Cash Checking accounts – NOW accounts Money Market accounts CDs

Bonds – Fixed Income Savings Bonds Corporate Bonds –A, AA, C – can default –Ownership in companies Municipal Bonds –City/state/government –Funds schools/projects Treasury Bonds –Full faith & credit of US Government

Bonds Principal remains the same –Dividends are paid – quarterly 5% - 3 years $5,000 purchase price $62.50 per quarter maturity Treasury –Purchased at discount 5% - 3 years 4,250 purchase price maturity

Stocks – Growth Individual stocks – ownership in companies –Proctor & Gamble –Microsoft Mutual funds – ability to diversify holdings –Fidelity – Peter Lynch/Magellan –Morningstar rating REITS ( Real estate investment trust) –Invest in real estate for minimum amounts

Stocks Dow Jones – 30 companies S&P 500 – 500 large cap Nasdaq – 5,000 –Value can increase/decrease –Dividends paid quarterly –High/low –Long term investment

US Stock Market History

Proctor & Gamble

Other financial terms IRA – can open even while in 401(k) 401 (k) – payroll deduction/company match. Estate – value of all you own when you pass. Will – road map for disposition of assets upon death. Trust – various uses during life and after.

Credit/Loans Credit cards –Interest rates –Minimum payment Auto loans –Installment – e.g. $7,000 x 8.75% for 5 years = $173 per month –Rates & terms determined if new car vs old car Mortgages –Similar to installment loans – e.g. 6.25% for 30 years = $615 per month Home Equity loans –Lines of credit and installment loans Student loans

Credit,Capital,Capacity Credit –Credit history – important all through life! –Determines rate Capital –Other assets –Value of collateral – if offered Capacity –Cash flow analysis – ability to repay

Cash flow analysis Example of loan 8.75% for 4 years Cash flow analysis –Income Annual salary = $50,000/12$4, Investment income = $5,000 stock x 2% TOTAL MONTHLY INCOME$4, –Expenses Rent$1, Credit Card debt ($1,000 x 3.5%) Other debt – student loans etc TOTAL MONTHLY DEBT$1, DEBT/INCOME = 28% ACCEPTABLE RATIO THIS EXAMPLE = $4,266/$1,535 = 35%

BUDGET Total gross income4, Total net income2, Rent1, Food Insurance Car loan Credit card35.00 Student loan Gas Miscellaneous Total monthly expenses2, Net - savings115.00

Your financial health Take control Read more about finances Monitor your own accounts – (identity theft) Seek advice Keep to budget Plan for future – 401(k) A MUST HAVE

Word of Wisdom The only way not to think about money is to have a great deal of it….Edith Wharton Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy…. Groucho Marx If you would be wealthy, think of saving as well as getting….Benjamin Franklin We make a living by what we get, we make a life by what we give….Sir Winston Churchill